Echo pledges $1bn to protect casino monopoly in Sydney

Echo Entertainment
chief
John Redmond
has promised to invest more than $1 billion to protect his casino monopoly in Sydney and crush
James Packer
’s bid to build a six-star hotel and invitation-only casino in Barangaroo.

Mr Redmond says Echo, which owns The Star casino in Sydney, will have a “more compelling" proposal for the NSW government than Crown.

“We don’t have a plan to lose, we only have a plan to win," Mr Redmond told Financial Review Sunday on Channel Nine. “I think when people see what it is that we’re looking at doing, they’re going to be absolutely amazed.

“We will end up with the best high-end facilities in the world, in my opinion, when we’re done here."

Echo Entertainment chief executive John Redmond is not giving up his NSW casino monopoly without a fight.
Photo: Louie Douvis

The two companies are due to lodge final proposals to develop tourism and casino facilities in Sydney on June 21 and an independent assessment panel led by businessman David Murray is expected to make a decision on which will progress by the end of June.

Echo will put forward a counter proposal to Crown’s plans to build a $1 billion hotel and casino on the western edge of the CBD. It is keeping its plans under wraps but is expected to invest in The Star and surrounding tourism areas in return for an extension of its period as the exclusive Sydney casino beyond the current 2019 expiry.

Attempts to quell concern

Mr Redmond tried to quell concerns that the company is committing to a new round of investment even though it has not yet delivered promised returns on an $870 million redevelopment of The Star finished in early 2013. He said it was “realistic" that The Star could deliver a 14 per cent return on that investment before the end of 2014.

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“Whatever [new] investment that we’re contemplating, and it’s going to be upwards of a billion, if not more, the investments that we’re talking about are going to have a return," he said.

Mr Redmond said further investment in The Star would have a multiplier effect on returns. “When you start putting more money into a property in the right areas of the business, it makes the returns much more achievable because it becomes more synergistic with the additional assets which you add to the building," he said.

“It’s a situation where you get one plus one equals four. And that’s why we think the returns will be there."

Crown was quick to hit back. “The Star has had 17 years to make a significant contribution to Sydney’s tourism infrastructure and has failed dismally," a Crown spokesman said.

“Echo has yet to deliver the return on their previous investment in The Star and their latest attempt to fix the facility has been pulled together at the last minute purely to block Crown."

Although Crown has been aggressive in its battle against Echo, Mr Redmond said he had “nothing against Crown and nothing against James Packer". But he questioned Mr Packer’s estimate that the hotel proposed by Crown would bring 2 million extra visitors to Sydney.

“If you just do some math on a 350-room hotel and you look at an average stay and normal occupancy level you’re looking at a visitation that’s probably between 20,000 and 40,000 people . . . so how you get the 2 million is anyone’s guess."

Casino tower ‘on steroids’

He said Echo had almost doubled its market share in the high-roller segment since 2010 partly by stealing customers away from Crown’s Melbourne flagship property. He hinted Crown might be planning what he described as a casino tower “on steroids" mainly because it was concerned about The Star’s performance and not because it was trying to expand a small pool of VIP gamblers. “If you need to grow a small pool of VIP gamblers then you don’t need 10,000 square metres of gambling space [that Crown is proposing] and a massive casino to do it," he said.

Echo, which has said it will spend $1 billion developing a new casino in Brisbane as part of its expansion plans, is also up against Crown in that market, vying for the same site.

Mr Redmond expressed surprise at Crown’s interest in Brisbane but said Echo was not worried about the extra competition. “In Queensland, we have the only licence there and they would have to look at having a two casino market as well," he said. “My comments for Brisbane would be the same as I said for Sydney: it should be one casino and one city and that’s it."

He said although Echo was the sole exclusive casino licence holder in NSW, it did not enjoy a monopoly in the gambling market. “When I first joined this company I was rather alarmed, frankly, when I used to think this was a monopoly and realised here in NSW alone there’s 97,500 slot machines and we only have 1500 of them.

“It’s far from a monopoly here," he said. “The Australian gaming market is about large pubs and clubs and one casino in each of the cities."

He argued allowing more than one casino in each major city would simply split the business investment and result in no greater tax revenue for the state governments. However, Mr Redmond said it did not make sense to form a joint venture with Crown, which had approached his company about a deal before it sold its 10 per cent stake in the group last month. “I have been involved in JVs before. I don’t think a JV with Crown here in Sydney makes any sense," he said.

He said Echo had looked into a range of funding options and was not considering selling smaller assets such as its Townsville casino to fund its bigger projects.